Gold Prices Tumble Amid Fed Hawkishness vs Central Bank Demand

The gold market is experiencing a tug of war between central bank appetite and the Federal Reserve's hawkish stance. Spot gold prices have declined by 2.7% to $4,331.87 per ounce after Fed Chair Kevin Warsh's remarks at Jackson Hole.

Warsh's warning that inflation is not declining meaningfully and reaffirming the Fed's commitment to returning to its 2% target has sparked a repricing in interest rate expectations. The implied probability of a September rate hike jumped from 36% to about 64%, making gold, which pays no yield, less attractive.

Central banks, however, continue to show robust demand for gold, purchasing 288.9 tonnes in the second quarter of 2026, a 62.4% increase year-on-year. Goldman Sachs remains optimistic, targeting $4,900 per ounce by year-end, while Crescat Capital's Kevin Smith is even more ambitious, predicting $20,000 per ounce by 2030.